Insurance companies offer job-loss covers

Confronted with a suspension order or a pink slip? May be because an M&A (merger and acquisition) is in the works? Worse still, you are the sole bread winner in your family and have been diagnosed with a life-threatening ailment and have lost your job. Now, there is some temporary respite in the form of a job loss insurance policy.

Under such covers, the insurer steps in to pay three EMIs (equated monthly installments) of your biggest burden, the home loan, where the loan eligibility is normally 50% of your monthly income.

Under it’s recently launched Safe Loan Shield (a critical illness cover) to salaried employees, Royal Sundaram provides a loss of job coverage of a maximum of three home loan EMIs. “It covers borrowers who are unable to repay their loan due to onset of critical illness or injuries due to accidents that either result in the death or total disablement of the borrower and loss of job,” managing director of Royal Sundaram, Ajay Bimbhet, said.
By and large, job loss covers are bundled as an add-on in a critical illness plan and personal accident covers in India with the premium surcharge on it ranging between 5% and 10%. Such policies cover termination from employment of the insured, or his or her dismissal, temporary suspension or retrenchment during the policy period. The exclusions in such policies are termination of employment due to fraud or dishonesty on the part of the employee.

Explaining the rationale of ‘three home loan EMI repayments’ by insurers, officials state that it is the normal time taken by a person to find another job. Also, from an accounting standpoint, a home loan account also slips into NPA (non performing asset) category if payments (interest and/or principal) are not made for over 90 days.

“There is growing traction for such add-on covers. The Indian economy is changing fast and technology-related changes and automation have brought about disruption in many sectors with many jobs becoming redundant,” chief of underwriting and claims at ICICI Lombard, Sanjay Datta, said. The company has an employment loss cover as an add-on to its personal accident as well as critical illness cover. “The add-on policies have registered 10% growth in premiums in the last one year and a job loss supplement to the main cover definitely enhances the overall value proposition,” Datta said.

Like ICICI Lombard, HDFC Ergo’s Home Suraksha Plus covers you in case you are handed a pink slip post a merger or acquisition of your organization. “A comprehensive package, we have designed it as a one-stop solution rather than multiple policies covering different risks or eventualities,” executive director of HDFC Ergo, Mukesh Kumar, said.

And as such products gain more acceptance, insurers are looking to offer a cover even when the resignation is voluntary in nature. For instance, Bajaj Allianz is currently working on plans where home EMIs can be paid for a temporary period by the insurer when the insured would like to take a sabbatical from work. The company currently has a job loss cover under its critical illness plan.While mental health experts state that insurance coverage for job loss would be helpful to family members in times of critical illness of the prime earner, there’s some caution for those who have multiple loans and a poor history of personal finance management.

“The back-up option of insurance being there could get them to indulge in deeper debts,” psychologist Saras Bhaskar said.

Under such covers, the insurer steps in to pay three EMIs of your biggest burden, the home loan, where the loan eligibility is normally 50% of your monthly income.